New South Wales Supreme Court CITATION : Araise Group v Residential Lifestyles [2010] NSWSC 46 HEARING DATE(S) : 2 February 2010 JUDGMENT DATE : 12 February 2010 JURISDICTION : Common Law JUDGMENT OF : Harrison AsJ (1) The decision of her Honour Magistrate Tabbaa dated 12 June 2009 is affirmed. DECISION : (2) The appeal is dismissed. (3) The summons filed 9 July 2009 is dismissed. (4) The plaintiff is to pay the defendant's costs as agreed or assessed. CATCHWORDS : APPEAL AND NEW TRIAL - Appeal - Question of law - Where Magistrate found for defendant on every issue - Whether there was error of law LEGISLATION CITED : Local Court Act 2007 CATEGORY : Principal judgment Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Carr v Neill [1999] NSWSC 1263 CASES CITED : Devries v Australian National Railways Commission (1993) 177 CLR 472 R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082; (2002) 37 MVR 479 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588 Swain v Waverley Municipal Council [2005] 220 CLR 517 PARTIES : Araise Group Pty Ltd (ACN 125 031 370) (Plaintiff) Residential Lifestyles Pty Ltd (ACN 058 306 675) (Defendant) FILE NUMBER(S) : SC 2009/295224 COUNSEL : K Welshman (Plaintiff) G Niven (Defendant) SOLICITORS : Austin Haworth & Lexon Legal (Plaintiff) Wood Marshall Williams (Defendant) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 7746/08 LOWER COURT JUDICIAL OFFICER : Tabbaa LCM LOWER COURT DATE OF DECISION : 12 June 2009 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ASSOCIATE JUSTICE HARRISON FRIDAY, 12 FEBRUARY 2010 2009/295224 - ARAISE GROUP PTY LTD v RESIDENTIAL LIFESTYLES PTY LTD JUDGMENT (Appeal decision of Local Court Magistrate) 1 HER HONOUR: By summons filed 9 July 2009, the plaintiff seeks firstly, an order staying the decision of her Honour Magistrate Tabbaa in the Local Court dated 12 June 2009 and its enforcements pending the hearing of this summons; secondly, an order that the appeal be allowed; thirdly, an order setting aside the decision of the Local Court dated 12 June 2009; and fourthly, an order remitting the matter to the Local Court for determination. 2 The plaintiff in these proceedings is Araise Group Pty Ltd (ACN 125 031 370) ("Araise Group") who was the defendant in the Local Court proceedings. The defendant is Residential Lifestyles Pty Ltd (ACN 058 306 675) ("Residential Lifestyles") who was the plaintiff in the Local Court proceedings. For convenience, I shall refer to the parties by name. Araise Group replied on the affidavit of Carrie Lee sworn 3 September 2009 that annexed the Local Court pleadings, transcript and judgment. Residential Lifestyles did not rely upon any affidavit evidence. 3 Araise Group seeks relief under s 39 of the Local Court Act 2007 which provides that a party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law. 4 The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered in Allen v Kerr & Anor (1995) Aust Torts Reports 81-354; Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156; Carr v Neill [1999] NSWSC 1263 and R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082; (2002) 37 MVR 479. The judicial officer cannot act on evidence inconsistent with facts that are incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588. 5 Section 41 of the Local Court Act provides that the Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal. 6 In Swain v Waverley Municipal Council [2005] 220 CLR 517, Chief Justice Gleeson at [2] reiterated that in the common law system of civil justice, the issues between the parties are determined by the trial process. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal. Grounds of appeal 7 There are 14 grounds of appeal that are very lengthy. Some of them refer to factual findings where there is evidence to support them. Hence they are not proper grounds of appeal. I shall refer to the main grounds shortly. 8 In the Local Court, Residential Lifestyles, a building project manager, claimed that Araise Group, a developer, owed it moneys pursuant to three separate agreements, namely, the first, second and third consultancy agreements. At the hearing before the Magistrate, Ms Tracy Cui gave evidence on behalf of Araise Group. Residential Lifestyles had a number of witnesses, including its director, Mr Stacey, and two former employees of Araise Group, Mr Richard Summerville and Ms Grace Zou. Ms Zou was unavailable at the time of the hearing. However, Residential Lifestyles's solicitor had prepared and served unsworn affidavit on Ms Zou's behalf. Araise Group tendered the unsworn affidavit and it was admitted into evidence. Ms Zou also signed a short statement, which was also admitted into evidence. The first consultancy agreement 9 So far as the first consultancy agreement is concerned, Araise Group submitted that the Magistrate used the evidence of Mr Summerville that dealt with pre-contractual negotiations to construe the first consultancy agreement. According to Arise Group this use of the evidence not only breaches the parol evidence rules it gives rise to a denial of procedural fairness. This is because, it says, the Magistrate admitted Mr Summerville's affidavit into evidence but only for the purpose of giving her Honour "background" to as to what had occurred and notwithstanding her Honour's undertakings as to how Mr Summerville's affidavit would be used, the trial Magistrate did use it as "evidence" (plaintiff's submissions [6]-[7]). 10 The first consultancy agreement is a written contract that required Residential Lifestyles to prepare a construction certificate submission for the council. Araise Group admitted that the final instalment amount of $3960 had not been paid to Residential Lifestyles. 11 The scope of works defined under the first consultancy agreement provided that Residential Lifestyles was to assist in the preparation of the relevant components of the construction certificate application for the Forestville property. The written agreement specified the following works: Complete architectural plans and specifications on plans Complete electrical layout plans Complete internal only plumbing and draining design Prepare electrical schedule' Prepare plumbing and draining schedule Obtain updated notice of requirements for Sydney Water Confirm fees for bonds, council contributions, long service levy. 12 The only issue that was in dispute so far as this first consultancy agreement was concerned was whether Residential Lifestyles supplied complete internal only plumbing and drainage design. At [27] and [28] of Mr Stacey's affidavit he deposed that on or around December 2007 to January 2008 he completed a preliminary electrical schedule and plumbing and drainage schedule for the 15 dwellings in the Forestville property. Both schedules contained the quantities required, however, Araise Group or the builder had to select the style and type of light fittings when ordering the items. Likewise Araise Group had to select the taps, basin and sinks. Copies of the electrical schedules were tendered in evidence (Annexure LS). Mr Stacey gave evidence that detailed plumbing and drainage designs which were included in the architectural plans and if you look at the architectural plants you will find a shower screen, toilet and hand basin on very floor plan (t 89.10 and also see t 91.7-22). It was open to the Magistrate to accept the evidence of Mr Stacey that the work had been completed. These findings were not made from background information supplied by Mr Summerville. There is no error of law nor is there a denial of procedural fairness. The second consultancy agreement 13 Firstly, Araise Group has contended that this second consultancy agreement was between it and Mr Stacey in his personal capacity. 14 Mr Stacey, at [40] of his affidavit sworn 9 March 2009, deposed to a conversation between himself and Grace Zou. Grace Zou was director of Araise Group. Mr Stacey's version is as follows: "GZ: What did you think of our offer? LS: [In reference to the offer faxed to Leo Stacey on 24 October 2007] The offer is too low to accept this salary pack. GZ: We can increase the offer to $80,000 per annum plus employee benefits. LS: Your offer is still very low the hourly rate is low. But I can work for you on a part time basis for now and we'll discuss in the future about full time employment. I am only available 20 hours a week. GZ: Ok then we can increase the hourly rate to $70 an hour for working 4 hours a day 5 days a week from 2pm till 6pm from our office in the city, would that be ok? GZ: Because of the part time position that bonus wont apply [referring to the bonus of 0.7% of $12,000,000], instead you will be getting $10,000 for the Parramatta project and $20,000 for the Forestville project. LS: Yean that's fine. I can start Monday (being 29 October 2007, but stated as 30 October 207 in the written offer). I will invoice you as consultant, not an employee, at the end of each week." 15 Mr Stacey gave evidence that while the offer was made to him personally he was to invoice as a consultant and (at t 61-62) he gave evidence that his agreement was to work on a part time basis and he did specifically tell Grace Zou that he could not work as an employee, and would work as a consultant. That is precisely what he did. Further Ms Cui at [6] of her affidavit dated 23 March 2009 deposed that her understanding was that Mr Stacey did not want to work fulltime for Araise Group. Rather he wanted to consult through Residential Lifestyle. All invoices were raised by Residential Lifestyles not Mr Stacey personally and paid by Araise Group. Hence, it was open on the facts for the Magistrate to find that the second consultancy agreement was between Araise Group and Residential Lifestyles. 16 The other outstanding issue for determination so far as the second consultancy agreement was concerned, was whether Residential Lifestyles is entitled to bonuses. Residential Lifestyles pleaded in the Local Court that it was a further term of the second consultancy agreement that Araise Group would pay Residential Lifestyles the sum of $10,000 plus GST upon the council issuing a construction certificate for the Forestville property; and Araise Group would pay Residential Lifestyles the sum of $10,000 plus GST upon the certifier issuing a compliance certificate for the Parramatta property ([21] ASC). The total amount that Residential Lifestyles claimed for bonuses is $22,000 ([29] ASC). Araise Group admitted that it offered bonuses to Residential Lifestyles, but says that a concluded agreement was never reached. 17 On 25 October 2007, there was a meeting at Forestville RSL where Ms Zou made notes on a document (Annexure LS). As in paragraph [40] (reproduced earlier), it was Mr Stacey's evidence that Ms Zou offered the bonuses. During cross examination, Mr Stacey gave evidence (at t 56.35) that he accepted the last offer as he calculated it was worth $100 per hour, and because of the bonuses. However, I accept that Ms Zou's version of the conversation does not support Mr Stacey's insofar as she does not say that she offered bonuses. However, Ms Zou does say (at [33] Aff, 2/2009) that there were many rounds of negotiations between Araise Group and Mr Stacey in relation to the terms and conditions and bonus payment; and that she could not recall details of every occasion because she had never been the decision maker throughout her employment at the Araise Group. 18 Before I refer to the Magistrate's reasons on the topic of bonuses, I should mention that her Honour found the evidence of Ms Cui unconvincing and did not accept her evidence. Her Honour (at [70]–[72]) gave three reasons. They are: "70 Firstly, [Araise Group] cannot deny any knowledge of an agreement in relation to bonuses. It was contained in the proposal provided to [Residential Lifestyles] when the offer of full-time engagement was made. That proposal was amended in view of the fact that [Residential Lifestyles] negotiated a part-time agreement. In addition, it cannot be denied on one hand and then on the other issue a formal notice to [Residential Lifestyles] to explain why it was being withdrawn. 71 Secondly, it is not true that Mr Stacey did not co-operate in providing advice in relation to the defects notice. Ms Zou stated that she received an email from Mr Stacy on 6 January requesting a copy of the Building Inspection Report. She confirmed that Mr Stacey had provided advice and support directly to the Site Manager, Saverio Vescio, in regards to rectifying the defects. She said she received another email from Mr Stacey dated 9 January 2008, regarding enquiries he had made in relation to rectification of the retaining wall on that project. The said wall was eventually rectified on or around early to mid January 2008 by Min Chen, a licensed builder engaged by [Araise Group]. [Residential Lifestyles] tendered copies of emails between the period 20 November 2007 and 9 January 2008 evidencing discussions with Mr Tass Velonas of AEV Design regarding the retaining wall, a site visit by Mr Velonas and advice by Mr Stacey to Mr Velonas that the final decision as to the successful tenderer rested with Ms Cui. No evidence had been put by [Araise Group] that the plans prepared by AEV Design on the instruction of [Residential Lifestyles] were inadequate. [Araise Group] conceded that there were a number of matters which [Residential Lifestyles] had no control over because they were issues not concerning [Residential Lifestyles]. 72 Thirdly, it is noted that that Ms Cui's statement did not indicate that [Residential Lifestyles] gave "wrong advice" in relation to the retaining wall. It stated that the objection to his advice was that it would have taken a lot longer and cost a lot more to undertake the work as recommenced by Araise Group then the way in which Min Chen undertook the work." 19 Counsel for Araise Group submitted that in making these findings the Magistrate misused the advantage of seeing and hearing the witnesses. In my view it was open to the Magistrate to make these findings and there was no palpable misuse of her Honour's advantage of seeing and hearing the witnesses. Later in this judgment I reproduce a document prepared by Araise Group that represents an offer made to Mr Stacey. 20 So far as the bonuses are concerned, the Magistrate stated at [59]: "59 In relation to the bonuses, Ms Zou's evidence was that during the negotiations she advised that the amounts stated in the proposal would not apply to part time work. Instead, she offered a bonus of $10,000 for the Parramatta project and $20,000 for the Forestville project. Mr Stacey agreed and recalled that she had said to him, " On top of your weekly salary of $2007.50 we are willing to offer you a bonus incentive of $10,000 for Parramatta upon obtaining a Compliance Certificate and $20,000 for Forestville, $10,000 upon obtaining the Construction Certificate and the other $10,000 upon obtaining the Subdivision Certificate ". 21 Her Honour continued at [96] and [97]: "96 The emails between Mr Stacey and Mr Velonas do not indicate any delay on the part of Mr Stacey. In addition, the Agreements between the parties only indicate achievement of certain milestones but do not stipulate any deadlines for their achievement. So long as he was involved in their achievement, the bonuses are due and payable. 97 I accept the submission that the Defendant seems to have been holding out a carrot to the Plaintiff on each occasion an Agreement was negotiated in relation to the bonuses. Although there was a slight variation, there was no question of non-payment of bonuses to the plaintiff until 18 February 2008 despite all the problems raised by the Defendant as being in existence since the first Agreement." 22 The Magistrate at [98] noted that Residential Lifestyles was not pursuing the second leg of the Forestville bonus. Her Honour accepted Mr Stacey's version of events and held that it was a term of the second consultancy agreement that bonuses were to be paid. The Magistrate concluded, in relation to the remaining bonuses, "all milestones have been achieved and consequently are due for payment." It is my view that it was open to the Magistrate to make a finding that the bonuses were due and payable. It was the third consultancy agreement that was not terminated, not the second. 23 Araise Group submitted that the Magistrate erred in finding that Residential Lifestyles was entitled to the consultancy rate, allowances and superannuation totalling $2007.50 per week as per the second consultancy agreement in circumstances where the Magistrate firstly, found that Araise Group was not aware of the sum of $2007.50 per week; secondly, that the sum of 2007.50 was never discussed; thirdly, Residential Lifestyles admitted that the sum of 2007.50 per week had never been offered by Araise Group; fourthly, Ms Grace Zou gave evidence that no offer of superannuation, a car allowance or a phone allowance was ever made; fifthly, the Magistrate did not make a determination as to the terms of the second consultancy agreement; and sixthly, there was no evidence to support such a finding. At Annexure LS-S, appears a copy of an offer that Mr Stacey says was prepared by Ms Zou. It states: "Dear Leo I am inviting you to join our rapidly growing company and I trust you will be capable of helping to build a winning team. We are pleased to offer you're (sic) the position as out project manager with the following awards package: Base Salary of $75,000 p.a. Super at 9% of 6,570 p.a. Mobile phone at $1,200 p.a. Training fee at $2,500 p.a. Total of $ 97,450 p.a. Plus 0.7% of the turnover of the Forestville project, the minimum turnover of Forestville will be $12,000,000, so the incentive will be $84,000, be shared amongst the project manager and a project manager assistant, amounts to be determined by the project manager, not less than 50% for the project manager." 24 During the discussion Mr Stacey made some handwritten amendments to the document. Hence, there is evidence to establish that offers for superannuation, phone and car allowances were made. The sum of $2007.50 represented $70 per hour x 4 hours x 5 days. These invoices were paid by Araise. The third consultancy agreement 25 Araise Group alleged that the third consultancy agreement was formed on 17 December 2007 at Residential Lifestyles's offices and that it was partly oral and partly written. Araise Group disputed that agreement had ever been reached, although it did admit that negotiations had occurred between the parties on 17 December 2007. 26 Counsel for Araise Group submitted that the third consultancy agreement came to an end on 16 February 2008 and therefore no bonuses were payable as the contract was terminated prior to the compliance certificates being issued. However, as previously stated, there is evidence that the bonuses were part of the second consultancy agreement not the third. 27 Further, the Magistrate stated the email of 7 February 2008, confirmed that the agreement signed on 20 September 2007 regarding the bonus payments on the Forestville project would still be honoured, $10,000 would be paid upon issue of the compliance certificate and a further $10,000 would be paid if the project was completed on time. Her Honour at [96] then stated that the emails between Mr Stacey and Mr Velonas did not indicate any delay on the part of Mr Stacey. In addition, the agreements between the parties only indicated achievement of certain milestones but did not stipulate any deadlines for their achievement. So long as he was involved in their achievement, the bonuses were due and payable and that all milestones had been achieved and consequently were due for payment. 28 Further, Araise Group submitted that the Magistrate erred in law in her findings on the credibility of Ms Cui's evidence and by preferring Mr Stacey's evidence the Magistrate misused the advantage of seeing and hearing the witnesses and acted on improbable evidence. I do not agree. As previously stated, it was open to the Magistrate to make the findings as to Ms Cui's credibility. 29 There has been no error of law. There has been no denial of procedural fairness. This appeal largely seeks to reargue the issues raised in the Local Court. The decision of her Honour Magistrate Tabbaa dated 12 June 2009 is affirmed. The appeal is dismissed. The summons filed 9 July 2009 is dismissed. 30 Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the defendant's costs as agreed or assessed. The Court orders: (1) The decision of her Honour Magistrate Tabbaa dated 12 June 2009 is affirmed. (2) The appeal is dismissed. (3) The summons filed 9 July 2009 is dismissed. (4) The plaintiff is to pay the defendant's costs as agreed or assessed. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.